Rice losing acreage battle this spring?

Rice may be competing for acres with other Mid-South crops this spring, but, so far, the other crops appear to be winning, according to one of the nation’s leading experts on the rice markets.

Carl Brothers, senior vice president, international rice and partnerships, at Riceland Foods, Inc., says little information has been available on the 2007 rice acreage. Informa Economics, formerly known as the Sparks Companies, is one of the few that had issued a projection in early March.

“They’re forecasting Arkansas to be down 5 percent off the small crop of a year ago,” he said, speaking at the Ag Update session at the Mid-South Farm and Gin Show in Memphis, Tenn. “Some growers I’ve talked to think the 2007 acreage could be even lower.”

“That doesn’t surprise me,” he said. “We’re really competing for acres. Rice is a high input cost crop, and I’m even hearing that bankers are encouraging farmers not to plant rice, but to go with soybeans or some other crop.”

Overall, U.S. farmers are expected to decrease rice acres by 3 percent — from 3.38 million to 2.75 million. But those numbers may be somewhat misleading because they include an 8 percent increase in medium grain rice in California. Absent California, U.S. rice acres could decline 5 percent from 2.31 million to 2.18 million acres.

Growers in Arkansas, the country’s largest rice-producing state, are expected to plant 1.33 million acres, which would be down from 2006’s 1.4 million. The 2007 projection is more than 300,000 acres below the record plantings in 2005.

Brothers, who oversees the rice marketing operations for the Stuttgart, Ark.-based Riceland Foods, said he was surprised by Informa’s forecast that Louisiana’s acreage would be down 6 percent in 2007.

“I thought Louisiana’s number last year — 350,000 versus 530,000 in 2005 — was mostly because of salt intrusion, Katrina and the other difficulties they had,” he said. “I was shocked to see them down again this year. I’m not sure that will be the case when it’s all said and done. It may depend on how this GE situation turns out.”

In Mississippi, farmers are expected to reduce their plantings 5 percent from 2006’s 190,000 to 180,000 acres as growers return to cotton and soybeans. Texas growers could reduce their acreage 10 percent from 150,000 to 135,000 acres and Missouri 5 percent from 216,000 to 205,000 acres.

California producers could increase theirs from 526,000 to 570,000 due to the higher medium grain rice prices of recent months. But the projected 2007 acreage would still fall short of the record 604,000 acres seeded in 2004.

USDA announced its first survey-based forecast of the 2007 acreage for rice and other crops on March 31. “By then, I think we will have a lot of people who have made up their minds about their crop mix,” said Brothers. “I think a lot of decisions are still being made out there right now.”

The discovery of trace amounts of LibertyLink genetic material — by Riceland Foods — continues to take its toll on U.S. rice sales — that and relatively high U.S. rice prices, Brothers noted.

“Some countries won’t buy our rice right now because they don’t want our GE rice, in many cases, and they don’t want to pay our high prices,” he said. “So we’re having a difficult time marketing rice out into the world.”

The current situation traces back to the reduced world stocks situation the rice industry currently finds itself in. With production remaining virtually unchanged over the last two years and world rice use on the rise, rice stocks are forecast to drop from 81 million metric tons to 79 million metric tons at the end of the 2006-07 marketing year.

Back in 2004, U.S. cash prices became “decoupled” from Asian rice prices, which were relatively low. With the world market price for marketing loan calculations based on world prices, farmers received both a loan deficiency payment or LDP and higher cash prices.

“A lot of people began to think that LDP would be there all the time because they saw that happen,” said Brothers. “But it was actually just an aberration in that world prices were low while ours were high.

“Since that time, looking back at those carry-over stocks, world prices are coming up. We’ve lost our LDP because world prices are higher than loan. At the same time, we’ve run off and left the crowd again with our prices. We’re probably $125 a metric ton above Thailand’s rice prices.”

Iraq provides a good example of the issues U.S. rice exporters face with the twin problems of genetically modified rice and prices.

Iraq has re-tendered for rice after an earlier tender apparently resulted in no purchases by the Iraqi Grain Board, the organization that makes many of the food purchases for the country.

“I’m told we’re going to get a counter-offer from the Iraqis, one that we may not like,” said Brothers. “First off, the Iraqis are looking at the Thai prices, and we’re $125 a ton higher than those.

“They also are not enamored with our GE issue. Actually, their tenders call for no GE rice. We have been able to work that out with them, and rice shipments have continued, but I have to tell you that we are concerned every day that we will be held hostage by this issue.”

The USA Rice Federation is also considering sending a delegation to the Philippines to discuss that country’s reluctance to accept rice that might contain trace amounts of genetically engineered material in PL 480 shipments.

Under Title 1 of the PL 480 program, the Philippines and other eligible countries buy U.S. rice and repay the U.S. government at very low interest rates under a long-term financing arrangement. But the Philippines have not purchased U.S. rice because of the GE rice concerns.

“They have set their standards at 0.1, which no one in the South feels comfortable about meeting right now,” he said. “We’ve worked hard to try to get them to raise their tolerance level, but we’ve failed so far.”

With elections coming up in the country in May, he said, “the feeling is that no one will be willing to risk their political future by importing GE rice at this time. The Catholic Church in the Philippines has actually come out against the import of GE rice and has asked that U.S. rice be pulled off the shelves in that country.”